Goals unmet for affordable housing tax credit program in Texas

By Karisa King and Ryan Murphy

Updated 10:42 am, Monday, April 23, 2012

Texas has awarded $9.7 billion in tax credits to developers to build or refurbish affordable apartments, but the units have ended up primarily in impoverished minority neighborhoods with few going up in more affluent mostly white communities, a San Antonio Express-News-Texas Tribune investigation has found.

The Low-Income Housing Tax Credit program, - which gives federal incentives to private developers - is aimed at providing mixed-income housing to lift Texas residents out of poverty. But it directed more than three-quarters of the apartments to neighborhoods mostly made up of poor blacks and Hispanics, raising questions about whether the program promotes segregation.

In one of San Antonio's most fashionable neighborhoods for example, residents in January protested proposals for an affordable apartment complex for seniors, saying the 68 apartments would spoil the affluent Stone Oak neighborhood. In a storm of emails, calls and letters to local and state officials, they predicted bitter results: damaged property values, more traffic and crime.

By March, the neighbors had prevailed. The project and any chance of public funding this year were dead.

Harris County

In Texas, where tax-credit proposals often live or die with community support, the project's demise illustrates how the largest national program to create affordable housing pushes low-income developments away from desirable neighborhoods.

Subsidized developments in predominantly white neighborhoods in Harris County also were scarce. Only 3 percent of tax credit apartments are located in areas where whites make up at least 60 percent of the population and 91 percent are in neighborhoods where more than half of all residents are minorities.

The data depicts a major housing program that contradicts a federal priority to use housing dollars to break up concentrated poverty. But the 1986 law that created the program leaves it to states to oversee how the funds are spent, and in Texas the result has been stark.

1 Of the 193,000 tax-credit units funded statewide, 78 percent are in census tracts where more than half of all residents are minorities. By comparison, only 59 percent of all rented apartments are in the same areas, according to census data.

1 Neighborhoods with high concentrations of minority residents - 90 percent or more - are home to one of every three affordable units across the state, about twice the rate for all rental housing.

1 Poor census tracts where residents earned less than the median household income hold 80 percent of the affordable apartments, but only 64 percent of all rented units.

The location of affordable housing is important as policy makers increasingly focus on the links between neighborhoods and access to jobs, good schools, transportation and safe streets.

How Texas ranks

In many cases, tax-credit financing has clustered apartments in areas suffering from the blight the program is supposed to correct.

Texas suffers from the problem more than nearly all other states. A study by the U.S. Department of Housing and Urban Development in 2009 ranked Texas fourth in the nation for locating tax-credit apartments in areas where more than half of residents were minorities.

How the state housing agency dispenses the credits - worth about $450 million this year - has come under increasing public scrutiny. In March, a federal judge in Dallas ruled the program violates the Fair Housing Act. While the lawsuit focused on a concentration of tax credit-funded apartments in minority areas of Dallas, U.S. District Chief Judge Sidney Fitzwater ordered a statewide fix.

In its case against the state, a nonprofit group called Inclusive Communities Project claimed the department deliberately steered projects into minority neighborhoods. But Fitzwater sided with the state, which argued it has no control over the location of apartments and funding is based on a strict point system that is blind to race. The agency also pointed out that developers pick the sites and draw up proposals before the state awards funds to high-scoring projects.

The housing department and Inclusive Communities Project declined to comment while the state works on a correction plan, due in May.

High land costs in affluent areas and federal incentives for building in the poorest neighborhoods also aggravate the racial and economic imbalance, as does the scoring system, in which community support is the second biggest-point getter next to financial feasibility.

"Usually your more organized neighborhoods and communities are ones that have more resources, and those are the ones that are going to get organized more quickly if they don't want you there," said Jennifer Gonzalez, executive director of Alamo Area Mutual Housing Association, a nonprofit San Antonio developer. "We just don't even go there."

Can add to blight

Jill Khadduri, the former director of policy development at HUD, said poor areas already have housing with rents that are lower than the maximum allowed by the tax-credit program.

Unless affordable apartments coincide with other public subsidies, she said they don't typically improve neighborhoods. By competing with other low-rent apartments already in those neighborhoods, the subsidized units can even add to blight, she said.

"The net effect is not really to improve the neighborhood because it's just moving tenants from one building to the other," she said.

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